Insurer in Skelos probe benefited from extension tucked into state budget

New York Senate Majority Leader Dean Skelos and his son Adam leave Southern District Federal Court in Manhattan after his initial hearing on corruption charges on Monday, May 4, 2015. Photo Credit: Anthony Lanzilote

ALBANY - State lawmakers tucked an extension into this year's state budget of a law that grants a significant benefit to medical malpractice insurance companies operating in the red, such as Roslyn-based Physicians Reciprocal Insurers, a company linked to the federal probe of Sen. Dean Skelos.

The provision prevents the state Department of Financial Services from liquidating medical malpractice insurers that have a negative balance. It has been in place for more than a decade, renewed every few years and was set to expire in 2016, according to several sources and state documents. But in March, lawmakers took the unusual step of inserting the renewal in the state budget, a year before its slated expiration.

"This was insisted on by both houses of legislature. We opposed it and they insisted," said a high-level Cuomo official who requested anonymity. The official noted that lawmakers typically wait until a law is in its "sunset" year to consider it because that gives negotiators the most leverage.

The governor wanted to wait to handle the malpractice bill until next year.

"But [legislators] said, 'we won't close the budget without it,' " the Cuomo official said.

Michael Whyland, spokesman for Assembly Speaker Carl Heastie (D-Bronx), didn't address the timing but noted the Assembly, Senate and Cuomo all agreed to the budget. He said the exemption "helps ensure stability in the marketplace. It is a small marketplace to begin with so it is important to ensure stability so that physicians have access to medical malpractice insurance." Senate officials declined to comment.

Just five companies are authorized by the state to offer malpractice coverage to physicians and surgeons and two operate with a "negative surplus," according to industry lobbyists and state officials. In its most recent statement filed with the National Association of Insurance Companies, Physicians Reciprocal said it had an $86 million "negative surplus."

A company spokesman cited a previous statement in which it acknowledged being contacted in the federal probe of Skelos. He said it would have no further comment.

Federal prosecutors have indicted Skelos (R-Rockville Centre), 67, and his son, Adam, 32, charging that the former State Senate leader tried to "monetize" his political power by getting payments and a job for his son from a developer, an environmental firm and an insurer. Among other things, prosecutors alleged that the senator arranged a $100,000-per-year "no-show" job with a medical malpractice insurer. Skelos and his son have pleaded not guilty.

The company is headed by Anthony Bonomo, a Manhasset resident who is also a prominent campaign contributor and racehorse owner. Bonomo had been selected earlier this year by Cuomo to chair the New York Racing Association -- until stepping down Tuesday because of the link to the Skelos case. The association oversees racing at the Belmont, Aqueduct and Saratoga racetracks.

Physicians Reciprocal long has been one of the two biggest companies in New York's medical malpractice field, controlling about 25 percent of the market, according to a 2009 Crain's New York article. In the same story, Bonomo said the company then had a $43 million negative balance.

State records show that lawmakers renewed the exemption protecting medical malpractice insurers in 2012, extending it until the end of 2016. One of the sponsors then, Assemb. Charles Lavine (D-Glen Cove), said he backed the measure in part because Physicians Reciprocal is in his district and because the proposal was viewed as an ordinary extension of state law.

But he said he wasn't a part of the effort to renew it again in 2015, a year before its slated expiration, or to tuck it into the massive $150 billion state budget when the state's financial plan was adopted March 31 and April 1. "That was not anything I had to do with," Lavine said.

Physicians Reciprocal, like other large companies in New York, contracts with a number of heavy-hitting lobby firms, including two that are tied to the environmental firm in the Skelos probe.

State lobby records show Bonomo's company hired The Capitol Group and Brian Meara, companies that also represented an affiliate of AbTech, the Arizona-based environmental firm linked to the Skelos investigation. Physicians Reciprocal also hired Park Strategies, a firm led by former U.S. Sen. Alfonse D'Amato.